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H (H,H,H)
T
H (H,H,T)
T
H (H,T,H)
H T
(H,T,T)
T H (T,H,H)
T
H (T,H,T)
T
H (T,T,H)
T
(T,T,T)
Example: Mayas Investments
AVEDA n1 = 4
SEPHORA n2 = 2
Total Number of
Experimental Outcomes:
n1n2 = (4)(2) = 8
Tree Diagram
AVEDA SEPHORA Experimental
(Stage 1) (Stage 2) Outcomes
Gain 8 (10, 8) Gain $18,000
(10, -2) Gain $8,000
Gain 10 Lose 2
Gain 8 (5, 8) Gain $13,000
k m o p l t c
e u n i e o h
t s i c t m e
c t o k t a e
h a n l u t s
u r s e c o e
p d s e
Another example
How many ways can we design a license plate
with the following rules:
3 letters followed by 3 numbers?
6 6! 6 5 4 3 2 1
20
3 3!3! (3 2 1)(3 2 1)
ABC ACE BCD BEF
Basic Requirements:
0 < P(Ei) < 1 for all i
P(E1) + P(E2) + + P(En) = 1
Assigning Probabilities
Methods:
Classic equally likely outcomes
B = set of outcomes
Event Event
A B
Event
C
Complements of an Event
Given and event A the complement of A is
the event consisting of all sample points that are
not in A (Noted as Ac).
P(A) + P(Ac) = 1
P(A) = 1 - P(Ac)
Event A
Complement of
Event A
Event Event
A B
Union of Two Events
Event Event
A B
Intersection of A and B
SO According to the Addition Law
P (A U B) = P(A) + P(B) P (A B)
Event Event
A B
Intersection of Two Events
P( A B)
P( A|B)
P( B) NOTE: you are reducing the sample
Space to an event that has occurred
Example
Health insurance
Yes No Total
18-34 750 170 920
Age
35 and older 950 130 1080
P(A Y) = 750/2000 = .375 = probability that person is 18-34 and has health insurance
P(A N) = 170/2000 = .085= probability that person is 18-34 and no health insurance
P(B Y) = 950/2000 = .475= probability that person is >35 and has health insurance
P(B Y) = 130/2000 = .065= probability that person is >35 and no health insurance
Joint and Marginal Probabilities
Yes No Total
18-34 .375 .085 .460
Marginal Probabilities
Joint Probabilities In the margins of the matrix
w/in the matrix
Yes No Total
18-34 .375 .085 .460
P(N|A) = P(A N) / P(A) = .085/.46 = .1848 = probability that do not have health insurance
given that between 18-34
P(A|N) = P(A N) / P(N) = .085/.15 = .5677 = probability that in 18-34 group given that
dont have insurance
Independent events
the probability of an event is not influenced by
the presence of another event
P(A|B) = P(A)
or
P(B|A) = P(B)
Example
Female Male
Credit 578 1122
Card
Cash 272 528
850 1650
P(A B) = P(B)*P(A|B)
or
P(A B)= P(A)*P(B|A)
Prior Probabilities
Let:
A1 = town council approves the zoning change
A2 = town council disapproves the change
Conditional Probabilities
Past history with the planning board and the
town council indicates the following:
P(B|A1) = .2 P(B|A2) = .9
Tree Diagram
P(B|A1) = .2
P(A1 B) = .14
P(A1) = .7
c
P(B |A1) = .8 P(A1 Bc) = .56
P(B|A2) = .9
P(A2 B) = .27
P(A2) = .3
c
P(B |A2) = .1 P(A2 Bc) = .03
Sooo. The question is
Whats the probability of A1 given B i.e., P(A1|B)
P( A1 )P( B| A1 )
P( A1 |B)
P( A1 )P( B| A1 ) P( A2 )P( B| A2 )
(. 7 )(. 2 )
(. 7 )(. 2 ) (. 3)(. 9)
= .34
Conclusion
The planning boards recommendation is good
news for L. S. Clothiers. The posterior
probability of the town council approving the
zoning change is .34 compared to a prior
probability of .70.
You try it
#58